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Monday, 03 January 11
TAXATION FOR COAL MINING COMPANIES IN INDONESIA - A TAX EXPERTS VIEW
 COALspot.com - Mrs. Sri Wahyuni Sujono, managing partner of SF Consulting has wrote an exclusive report regarding taxation for coal mining companies in Indonesia for COALspot.com subscribers.
Currently, the conduct of Coal exploration, development and production in Indonesia is regulated by:
1.The Izin Usaha Pertambangan (IUP)/Mining Business License; and
2. The Perjanjian Karya Pengusahaan Pertambangan Batubara(PKP2B)/Coal Contract of Work (CCoW).
Tax Regime for a Coal Mining Company
The IUP company is subject to prevailing Indonesian tax laws. Unlike the CCoW, the IUP regulatory regime does not specify distinct tax rules. A CCoW company taxation terms in the Contract is lex specialis– that is, the terms in the contract override the general tax laws. For example, when certain specific tax rules are set out in a Contract, these tax rules take precedence over the prevailing tax laws. Generally, the tax rules in a Contract reflect those that are in force at the time the contract were signed, although there may be some exceptions. Typically, a Contract fixes the tax rules for the duration of the contract (with the exception of second generation CCAs where they generally follow the prevailing tax regulations).
Income Tax Rate
Under the prevailing Tax Law Regulations, a company is subject to corporate income tax on its net taxable profit. Net taxable profit is calculated based on gross income minus deductible expenses. The prevailing corporate tax rate for 2010 and onward is a flat rate of 25% of net taxable profit. If a Contract stipulates a specific corporate income tax rate, the Contract company may not be entitled to 25% corporate tax.
Income
Gross income usually represents sales of mining products and any other income earned by the mining company.
General Expenses
In general, deductible expenses are expenditures incurred to generate, maintain and collect taxable income and generally include an amount paid or accrued for all expenditures attributable to the company’s operations in a year which typically have a useful life of less than one year. Certain expenditures may not be tax deductible under the prevailing Income Tax law, e.g. donations and benefits-in-kind provided to employees. Some types of benefits-in-kind provided at the mining site may be deductible if the mine is located in a remote area (which is usually the case) and an approval from the DGT is obtained.
Exploration and Development Expenses
Exploration and development expenses may include camp construction, drilling, access road, project communication facilities, etc. On-site exploration expenses are generally deductible in the year the expenses are incurred provided the expenses meet the general deductibility criteria required. Exploration and mine development expenses should generally be capitalized and amortized upon spending rather than production.
Depreciation of Fixed Assets
Fixed assets are categorized into four categories, depending on the nature of the asset and its expected useful life. The rate at which the asset can be depreciated will depend upon the category of the asset. Assets are generally depreciated over 4, 8, 16 or 20 years and taxpayers may apply a diminishing balance or straight line approach to depreciation.
Amortization of Intangible Assets
Intangible assets may include pre-operating costs, patents, rights, licenses, etc. Costs incurred in the acquisition of mining rights with a beneficial life of more than one year should be amortized based on a production unit method, not exceeding 20% per annum.
Tax Losses Carried Forward
Tax losses can be carried forward for up to five years under the Tax Law and are utilized on a first-in-first-out basis. Tax losses cannot be carried back.
Reclamation Reserve
For accounting purposes, a mining company is usually required to maintain a reclamation reserve for environmental management and reclamation work during the contract period and at the end of the life of the mine. The reclamation reserve amount should be tax deductible provided that it is calculated in accordance with the prevailing energy/mineral resources sector laws/regulations. If the actual cost exceeds the reserve, the balance is generally tax deductible.
VAT
Under VAT Law No. 42/2009, coal is not subject to VAT. As a consequence, the input VAT paid to the company’s suppliers are not creditable. Some Contracts may adopt a VAT regime different than the prevailing VAT regulations. For example, there may be provision that Input VAT may be creditable/refundable despite the fact that the coal being produced is not subject to VAT. During the pre-production stage of the Contract, the company shall not have any Output VAT due to there being no delivery of mining product at that point. Therefore, VAT overpayment is likely as the company should pay its Input VAT to vendors for purchases of taxable goods/services. Some Contract companies should collect and pay VAT charged by its vendors (i.e. Output VAT) directly to the State Treasury (act as a VAT collector) as required by the relevant Contract.
Withholding Tax
The Contract company is obliged to withhold income tax from payments of dividends, interest, royalties and most types of services. The Withholding tax rate will depend on the type of service and whether the service provider is a resident or non-resident that stipulated in the tax rules Contract. The general withholding tax rate for services is 2%. The Withholding tax on dividends, interest, royalty paid to Indonesia tax resident is at 15% while for non-resident is set at 20%, though this rate is reduced by most of Indonesia’s double tax avoidance agreements. Some Contracts may provide a reduced Withholding tax rate into nil or 7.5%.
OTHER TAXES
Royalties
Royalties are payable quarterly to the Government based on the actual volume of production according to details set out in the IUP/CCoW. The royalty is tax deductible.
Land and Building Tax
The company is required to pay land and building tax as set out in the IUP/CCoW. Dead rent is an annual charge based on the number of hectares in the Mining Area. The land and building taxes are deductible for income tax.
To download this report click here.
Writer’s Profile :
Mrs. Sri Wahyuni Sujono, graduated with a Business Administration degree from the University of Wisconsin-Madison, USA. She is a certified Tax Attorney, Tax Consultant and holds a Brevet C – the highest working license qualification, and is the managing partner of SF Consulting. Sri also has expertise outside tax consultancy; she is a Chartered Financial Consultant (ChFC) and a qualified lawyer, giving a more holistic outlook and approach to her services.
Sri has had over fifteen years of experience of tax consulting with Arthur Andersen and Ernst and Young Indonesia; three years of which she was a Tax and Business Partner. She is the Vice Chairman of the Taxation Committee at the Indonesian Chamber of Commerce (KADIN), the Head of Foreign Affairs in the Indonesian Tax Consultant Association (IKPI) and sits in the Board of Experts in the Indonesian Chinese Association (INTI).
Disclaimer: This report has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this report without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this report, and, to extent permitted by law. SF Consulting and COALspot.com, its directors, members, employees, agents do not accept or assume any liability, responsibility or duty of care of any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this report or for any decision based on it.
If you believe an article violates your rights or the rights of others, please contact us.
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Monday, 19 December 22
ENERGY CRISIS FUELS COAL COMEBACK IN GERMANY - REUTERS
Coal has made a comeback in Germany this year, as Europe’s largest economy turns to the dirty fuel to power it through an energy crisis.
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Tuesday, 13 December 22
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Tuesday, 13 December 22
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- Merrill Lynch Commodities Europe
- Gujarat Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Wood Mackenzie - Singapore
- Cement Manufacturers Association - India
- McConnell Dowell - Australia
- Bulk Trading Sa - Switzerland
- Power Finance Corporation Ltd., India
- Mercator Lines Limited - India
- Ind-Barath Power Infra Limited - India
- Electricity Authority, New Zealand
- Bhushan Steel Limited - India
- Samtan Co., Ltd - South Korea
- Ministry of Mines - Canada
- Tata Chemicals Ltd - India
- Binh Thuan Hamico - Vietnam
- PNOC Exploration Corporation - Philippines
- Aditya Birla Group - India
- Parry Sugars Refinery, India
- AsiaOL BioFuels Corp., Philippines
- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- SMG Consultants - Indonesia
- Makarim & Taira - Indonesia
- Baramulti Group, Indonesia
- ICICI Bank Limited - India
- Energy Development Corp, Philippines
- Trasteel International SA, Italy
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coal and Oil Company - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Marubeni Corporation - India
- The State Trading Corporation of India Ltd
- Petrochimia International Co. Ltd.- Taiwan
- MS Steel International - UAE
- PetroVietnam Power Coal Import and Supply Company
- Indonesian Coal Mining Association
- Georgia Ports Authority, United States
- Pipit Mutiara Jaya. PT, Indonesia
- Bharathi Cement Corporation - India
- Kalimantan Lumbung Energi - Indonesia
- PTC India Limited - India
- India Bulls Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Mercuria Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Indo Tambangraya Megah - Indonesia
- Grasim Industreis Ltd - India
- Intertek Mineral Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Interocean Group of Companies - India
- Malabar Cements Ltd - India
- Planning Commission, India
- Pendopo Energi Batubara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- IEA Clean Coal Centre - UK
- Dalmia Cement Bharat India
- European Bulk Services B.V. - Netherlands
- Salva Resources Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Edison Trading Spa - Italy
- LBH Netherlands Bv - Netherlands
- Altura Mining Limited, Indonesia
- Kartika Selabumi Mining - Indonesia
- IHS Mccloskey Coal Group - USA
- GVK Power & Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Independent Power Producers Association of India
- Miang Besar Coal Terminal - Indonesia
- Star Paper Mills Limited - India
- Price Waterhouse Coopers - Russia
- Latin American Coal - Colombia
- Jaiprakash Power Ventures ltd
- Bhoruka Overseas - Indonesia
- The University of Queensland
- International Coal Ventures Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Singapore Mercantile Exchange
- Holcim Trading Pte Ltd - Singapore
- Aboitiz Power Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Ministry of Finance - Indonesia
- TeaM Sual Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Attock Cement Pakistan Limited
- Carbofer General Trading SA - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Mining Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- Energy Link Ltd, New Zealand
- Antam Resourcindo - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- CNBM International Corporation - China
- GAC Shipping (India) Pvt Ltd
- Eastern Coal Council - USA
- Alfred C Toepfer International GmbH - Germany
- TNB Fuel Sdn Bhd - Malaysia
- Indogreen Group - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Kumho Petrochemical, South Korea
- Siam City Cement PLC, Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Globalindo Alam Lestari - Indonesia
- Economic Council, Georgia
- Borneo Indobara - Indonesia
- New Zealand Coal & Carbon
- Manunggal Multi Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thiess Contractors Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Central Electricity Authority - India
- Leighton Contractors Pty Ltd - Australia
- Orica Australia Pty. Ltd.
- Toyota Tsusho Corporation, Japan
- Goldman Sachs - Singapore
- Therma Luzon, Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Renaissance Capital - South Africa
- Heidelberg Cement - Germany
- Mintek Dendrill Indonesia
- Sojitz Corporation - Japan
- Bhatia International Limited - India
- Indian Energy Exchange, India
- Commonwealth Bank - Australia
- Wilmar Investment Holdings
- Meenaskhi Energy Private Limited - India
- Standard Chartered Bank - UAE
- The Treasury - Australian Government
- Electricity Generating Authority of Thailand
- Kobexindo Tractors - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Petron Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Medco Energi Mining Internasional
- OPG Power Generation Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Larsen & Toubro Limited - India
- Videocon Industries ltd - India
- Lanco Infratech Ltd - India
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Sidhee Cement - India
- Thai Mozambique Logistica
- Ambuja Cements Ltd - India
- Sical Logistics Limited - India
- Bayan Resources Tbk. - Indonesia
- Banpu Public Company Limited - Thailand
- Riau Bara Harum - Indonesia
- Romanian Commodities Exchange
- Coalindo Energy - Indonesia
- Agrawal Coal Company - India
- Bahari Cakrawala Sebuku - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Indika Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Central Java Power - Indonesia
- Eastern Energy - Thailand
- Sarangani Energy Corporation, Philippines
- VISA Power Limited - India
- CIMB Investment Bank - Malaysia
- SMC Global Power, Philippines
- Deloitte Consulting - India
- White Energy Company Limited
- London Commodity Brokers - England
- Kideco Jaya Agung - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Vizag Seaport Private Limited - India
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- Sakthi Sugars Limited - India
- PowerSource Philippines DevCo
- Metalloyd Limited - United Kingdom
- Chamber of Mines of South Africa
- Neyveli Lignite Corporation Ltd, - India
- Sinarmas Energy and Mining - Indonesia
- Formosa Plastics Group - Taiwan
- Meralco Power Generation, Philippines
- Sree Jayajothi Cements Limited - India
- Australian Coal Association
- San Jose City I Power Corp, Philippines
- Xindia Steels Limited - India
- Vedanta Resources Plc - India
- Minerals Council of Australia
- Karaikal Port Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Tamil Nadu electricity Board
- Uttam Galva Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Rashtriya Ispat Nigam Limited - India
- Global Business Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Oldendorff Carriers - Singapore
- Bukit Baiduri Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- Bukit Makmur.PT - Indonesia
- Madhucon Powers Ltd - India
- Iligan Light & Power Inc, Philippines
- Parliament of New Zealand
- Posco Energy - South Korea
- Ceylon Electricity Board - Sri Lanka
- Vijayanagar Sugar Pvt Ltd - India
- Indian Oil Corporation Limited
- Anglo American - United Kingdom
- Siam City Cement - Thailand
- Ministry of Transport, Egypt
- Karbindo Abesyapradhi - Indoneisa
- Africa Commodities Group - South Africa
- Australian Commodity Traders Exchange
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